Scaling Ad Spend Will Impact Your Metrics. Here’s What to Expect and How to Optimize
by Jeff Pearlman
A foundational aspect of growth — be it personal, professional or business — is getting out of the comfort zone.
For you personally, the comfort zone might feel like having both your feet planted firmly on the ground. So skydiving, while exhilarating, might be a nerve-wracking prospect. Is the chance to fly worth the fear of falling? That’s only for you to decide.
When it comes to business goals though, the only surefire way to achieve year-over-year growth is to push past that comfort zone. For e-commerce brands, that almost universally means scaling up spend on ads. This can be out of the comfort zone for many marketers. It’s not a question of if it will rock the boat; it’s a question of when and how increasing the digital advertising budget will make waves.
E-commerce marketers always have to contend with incomplete information and use their strategic instincts to make decisions. But scaling ad spend is an uncomfortable endeavor simply because the metrics you rely on will take a hit.
Sometimes you have to free-fall a bit before you fly. So set your expectations, know what to look for, and get some guidance that will give you the best chance of nailing a perfect landing.
The Relationship Between ROAS and Scaling Ad Spend
Of course, changing the amount you spend on ads will impact your return on ad spend (ROAS). But it does get tricky because it’s not a linear effect.
Increasing your ad spend 3x doesn’t necessarily translate to 3x return.
First, you can scale horizontally or vertically, and either of those will likely have different challenges. Vertical scaling refers to increasing spend on one platform. Horizontal is increasing ad spending across multiple channels.
For vertical scaling, it’s important to realize you are going to reach a wider audience. However, advertising algorithms have a learning period. In an established campaign, that means a deep understanding of how to reach the top-performing audience. By spending more, the technology will be forced to re-learn with a new, bigger audience.
For horizontal scaling, that same learning curve for the algorithm applies, but so does a learning curve for the campaign creators, too. If you are expanding horizontally into new channels, there will be some bumps in the road as you get a handle on how ad types, messages, creative assets, and targeting all play a role.
Changes to Expect in Your Metrics Dashboard
Whatever way you scale, you will almost definitely see an initial dip in ROAS. Over the course of scaling ad spend, ROAS will bounce back up, but don’t be surprised if the impact of scaling ad spend leaves a lasting impression on this one specific metric.
It’s because both the humans and robots behind the ad spend have learning to do. It’s also because you’ll be hitting a larger audience.
Don’t panic! This is a good thing. If you have been successfully running optimized campaigns at $10,000, you might be reaching 3 million people. Over time, your campaign has trained itself to hit the best possible 3 million users. These are people who are clearly interested in your product and aligned with your brand.
As you scale, you’ll reach an audience with slightly different degrees of interest and alignment. When this happens, you may continue to see success despite a small dip in ROAS because the volume of potential purchasers is higher overall. Despite a dip in quality and return on your spending, the benefits remain. You’ll reach a wider audience and refine your strategy as you collect new data.
But that begs the question: Could you hit diminishing returns as you scale? At a certain point, yes. There will always be an upper limit to how much return you can see on your ad spend. However, the potential to quickly see diminishing returns depends heavily on your industry. A local florist shop with a five-mile delivery radius will tap out its potential market much faster than an athleisure brand with national shipping capabilities.
4 Tips to Optimize the Scaling Process
Every marketer has heard it before: To make money, you have to spend money. And the digital ad environment is one arena where that is undeniably true. But that’s not an instruction to throw money at your goals and expect to achieve them. Getting the best return on your ad spend relies on a carefully thought out and well-designed strategy.
1. Ignore the Urge to Tweak
As you make larger changes to your ad spend, you’ll naturally want to make tweaks to marketing assets. But every change in your campaign will reset the learning period and delay your optimization process.
It’s like day trading. Most day traders aren’t profitable because they make moves based on gut instincts and speculation. Instead of making tiny tweaks because you see metrics changing, take a step back, let the algorithms learn, and make strategic moves that will have a long-term payoff.
2. It’s Not Just a Numbers Game
Nurturing customers through your sales cycle is not just about spending more on ads to reach more people with greater frequency. Ads need to be calibrated to your consumers’ interests and values.
A campaign without personalization is like a car without a steering wheel. Pump as much gas as you want into it, but you probably won’t reach your desired destination. No matter how much you spend, foundational components like branding, creative, messaging, and timing need to be in place for your campaign to gain conversions.
3. But Don’t Lose Sight of Metrics
That said, you should have an eagle eye on metrics. All of your metrics. ROAS, while an important metric, isn’t the only barometer of success for growth. Fixating on ROAS is not the way to get a comprehensive view of campaign performance.
Share of voice, awareness, interest, and consideration matter just as much to your overall goals. Tracking reach, impressions, clicks, click-through rates, and conversions can shed important light on the top and middle of your funnel.
In addition, profit on ad spend (POAS) is a metric you should always pair with ROAS. Both metrics together will give you a truer sense of revenue and profit, and how your ad spend is aligning with business goals.
Hyper-focusing on a single metric like ROAS can give you valuable details and insights into market shifts. But the best way to truly understand overall campaign performance is with a blended attribution model that considers multiple data sources and metrics.
4. Trust the process to see results
The best way to get results is to understand the sacrifices you’ll make in the short term to see long-term success. You can’t gain more market share by being timid or narrow-minded.
Digital advertising is, in a way, a pay-to-play endeavor. You’re going to pay for growing your company, growing your brand, growing your product line. Those things don’t come cheap.
Uncertainty and fluctuating metrics are par for the course, but setting a bold strategy and sticking to it despite down-turning metrics will help you see massive growth and market share gains.
Scale to See Results Now and in the Future
Digital advertising has the blessing and the curse of being one of the easiest marketing activities to measure. With cold, hard data, you get a black-and-white view of how your campaigns are performing. But is that the whole story?
Whether you scale on one channel or across a few, prepare yourself for the changes you’ll encounter. Knowing what to expect can help alleviate concern if your hallmark metrics start to look flat.
But the short and long-term benefits outweigh the doldrums when you start making changes.
Immediately, you’ll see expanded reach, more awareness, and more clicks — all of which will translate to increased interest.
Down the road, more ad spend increases your consideration set, your conversion set, and of course, your profit. With a larger pool of existing customers, you’ll gather more first- and zero-party data, which you can now use to retarget, personalize, and outperform your competitors.
Scaling ad spend might hurt ROAS at first, but the payoff is worth it. Repeat purchasers, lifetime customers, and fierce brand loyalty can all start with an influx of ad spend. So don’t be scared when you see the ROAS column slip. It’s time to get out of your comfort zone.
About the author: Jeff is an analytical and creative Digital Strategist with 9+ years of Social Media, Influencer and Content Marketing experience with various brands like Jaguar, Land Rover, Lenovo, Motorola, Ulta Beauty, Malin & Goetz, Teleflora, b New York and Raaka Chocolate – to name a few. He started his career as a copywriter, penning copy for an online sports company where he found his work featured on the back covers of national publications and featured on ESPN Radio. He currently resides in Seattle where he likes to spend as much time outside as possible with his wife and three kids, one of which is a dog.